Bank watchdog raises alarm on ADB’s general capital increase

2 May 2009, BALI – The NGO Forum on the Asian Development Bank today challenged the multilateral bank’s move for a general capital increase (GCI), calling it irresponsible and dangerous.

The ADB’s 42nd annual meeting opened today, with community representatives questioning ADB president Haruhiko Kuroda about the implications of the increased funds, given the region’s experience of forced displacement and environmental degradation caused by ADB projects.

The Forum is calling on the Bank’s Governors to take extreme caution with the institution’s general capital increase. “If not managed well, this 200% general capital increase could easily translate into a more than 200% increase in social and environmental harm,” warned Red Constantino, Executive Director of NGO Forum on ADB.According to the ADB, the purpose of the capital increase is to help the poorest countries in Asia to reach the Millennium Development Goals. However, this claim has been slammed by Bank monitors citing that the increase is largely planned to go toward private sector clients and big infrastructure, as described in the Bank’s Strategy2020, the ADB’s long-term strategic framework. Numerous studies have shown this type of financing does not translate into benefits reaching the poorest of the poor, and instead often exacerbates inequality.

“In the midst of global calls for increased regulations around financing, the ADB will be going against the current if is does not strengthen its social and environmental safeguard policies,” said Joanna Levitt of the International Accountability Project. “Without real improvements, we can expect to see more reckless use of Bank funds, resulting in more disastrous projects.” In Nepal, local communities and organizations are raising significant concerns about the proposed ADB-funded West Seti Hydropower Project, a massive proposed dam for one of the most remote and ecologically sensitive areas of Nepal. Over 30,000 people will be impacted by this project and at least 20,000 will be forced to move from their traditional lands and homes. The proposed resettlement sites are the homelands of indigenous Tharu people. “The ADB is planning to move tens of thousands of people onto our lands but there has been no free, prior, informed consent from Tharu people,” Said Raj Kumar Leky, Secretary General, Tharu Welfare Society.

“For over a decade we have been asking and asking for a complete copy of the environmental impact assessment in local languages,” said Ratan Bhandari, whose family will be relocated from their ancestral lands if the project goes forward. “Our people have never been told that the land they will be moved to may be contaminated by arsenic and is aleady occupied by Tharu people. There has been a stunning lack of consultation about this project which will devastate our environment and local livelihoods. “

“These social and environmental failings are not unique to West Seti, but are reported by communities impacted by ADB-financed projects across the Asia-Pacific region,” said Stephanie Fried of Environmental Defense Fund. “Globally, this is a real opportunity to rethink development finance. Will the ADB use its capital increase in a responsible manner or will it continue business as usual at the cost of local people and the environment?”The NGO Forum on ADB is a 250-strong Asian-led network of civil society organizations that has been monitoring the ADB’s programs, policies and projects since 1992.